B-Cells The Big Sell For Imugene

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Imugene's upcoming Phase II trial will be a very closely watched one in the biotech world: good results would be highly likely to attract a deal with a major pharmaceutical company, and that could set the share price buzzing.

Biotech companies often change their focus: Imugene (IMU) is in its third incarnation on the Australian Securities Exchange (ASX). Established in 2002, Imugene started out developing a range of animal health products designed to prevent disease in production animals, including a vaccine for H5N1 (avian influenza virus), or “bird flu.” That work foundered in late 2012, facing a lack of commercial interest and viability; and Imugene switched to developing a human drug delivery technology called Linguet, which enabled the active ingredient of drugs to be absorbed straight into the bloodstream when placed inside the cheek, or under the tongue. However, that work stalled too, and in October 2013, a new board and management at Imugene embarked on the latest iteration of the company.

This one is by far the most exciting, and potentially lucrative. Imugene now focuses on immuno-oncology, the stimulation of the body’s own immune system to generate responses to cancer – a potential treatment of cancer that does not involve chemotherapy or radiation therapy.

Immuno-oncology is arguably the hottest area in all of biotech at present. Imugene’s pathway into it was the purchase in October 2013 of Biolife Science Queensland Limited, a biotechnology company that owned a new oncology platform technology developed within the Medical University of Vienna, in Austria. Biolife Science Queensland had a lead drug candidate called HER-Vaxx, a gastric and breast cancer immuno-therapy that had successfully completed a Phase 1 study in breast cancer, and was classified by the US Food & Drug Administration (FDA) as Phase II-trial-ready.

The HER-Vaxx work was picked up by Imugene non-executive director, Paul Hopper, and a friend of his, Dr. Axel Hoos, a trained surgeon and very well-known figure in the fields of immunology and oncology. The two realised that Biolife Science’s intellectual property was well and truly in the immuno-oncology sweet spot.

Specifically, HER-Vaxx is a peptide vaccine that has been shown to stimulate the production of cancer-fighting HER-2 polyclonal antibodies in early-stage breast-cancer patients, working against the “biomarker” HER-2/neu, which is associated with cancer. There is already a drug, Roche’s Herceptin, which operates by binding on to the HER2/neu target biomarker and blocking the growth signals that cause the cancerous cells to proliferate. Herceptin is one of the world’s top-selling cancer drugs: Roche sells $US6.9 billion worth a year. But where HER-Vaxx is a potential advance on Herceptin is that it generates antibodies to three separate regions of HER2/neu, by activating the patient’s own antibody-generating immune response.

In a nutshell, HER-Vaxx stimulates a patient’s immune system to produce his or her own Herceptin-like antibodies internally. HER-Vaxx effectively turns the patient’s body into a Herceptin factory. Pre-clinical data from in vitro testing shows that polyclonal antibodies produced following vaccination with HER-Vaxx were more potent than the marketed monoclonal antibody Herceptin at inhibiting the growth of breast cancer cells: according to Edison Research, “less than half the dose of HER-Vaxx-stimulated antibodies was required to inhibit cancer cell growth to the same degree as Herceptin.”

The successful Phase I trial of HER-Vaxx indicated that it was safe to use and gave a good idea of what dosage to use. Now, Imugene plans a randomised Phase Ib/II clinical trial in patients with advanced gastric cancer, who are currently receiving chemo-therapy.

Gastric (or stomach) cancer is the second most common cause of cancer-related death in the world and the fourth most commonly diagnosed cancer, with more than one million new cases diagnosed each year.

Global contract research organisation (CRO) Simbec-Orion has been signed to conduct the upcoming trial, which is on track to begin in the second half of 2015, as part of an investigational new drug (IND) application with the FDA. Half of the planned 68 patients (from Australia and Europe) will continue to receive chemotherapy: half will receive chemotherapy plus a new, more potent formulation of HER-Vaxx, which has been designed to enhance the immune response obtained.

The new formulation has demonstrated a tenfold increase in the production of cancer-fighting antibodies in pre-clinical animal model testing and prompts a faster response from the immune systems, requiring just three vaccinations to achieve peak results. It also has improved manufacturing, making it cheaper, simpler and more reliable to make. In April Imugene filed a new patent application to protect the new formulation: the new patent filing potentially protects HER-Vaxx until 2036, which Imugene says would be significantly longer than the vast majority of competing clinical-stage products and technologies.

The Hoos connection is interesting. The German is vice-president of oncology research and development at global pharmaceutical giant Glaxo Smith Kline (GSK), but is also a non-executive director of Imugene: this is the only board position that Hoos holds outside of his work at GSK. Hoos’ confidence in the HER-Vaxx story was such that he made retaining his involvement with Imugene a condition of his joining GSK.

Hoos came to GSK from Bristol-Myers Squibb (BMS), where he was the medical lead in immunology/oncology, and developed the Yervoy (ipilimumab) monoclonal antibody, which was the first therapy to extend survival in patients with metastatic (advanced) melanoma. Yervoy has been approved by the FDA, the European Medicines Agency (EMA), and the Therapeutic Goods Administration (TGA) in Australia.

Yervoy was one of the first immune-therapy drugs to use the patient's own immune system to fight cancer, and has been found to be most effective in melanoma patients. It blocks a molecule called CTLA-4, which normally helps keep in check the immune system cells (called ‘T-cells’) which are capable of killing other cells. When Yervoy blocks CTLA-4, the drug takes the brake off the immune system and allows the T-cells to activate and proliferate to attack the cancer cells. Yervoy has about a 20% success rate in patients and it can have side effects, including auto-immune disorders, in which the immune system attacks normal cells in the body.

Hoos says that while most of the early immuno-oncology work – like Yervoy – focused on using T-cells’ cell-killing ability as a tool, the beauty of HER-Vaxx is that it uses ‘B-cells,’ produced in the bone marrow, which are capable of making antibodies. “That is the next wave of focus,” says Hoos. “B-cells are half of the immune system.”

Hoos says the advances in immuno-oncology since 2011 mean that “we have figured out how to use the body’s immune system to treat cancer.” With this knowledge, he says, chemotherapy and radiation therapy can start to be replaced as the standard-of-care for certain cancer conditions: he says this has occurred with melanoma, and is starting to occur with lung cancer. He expects the next applications to fall to be bladder cancer, head and neck cancer, and colon cancer.

“We can’t eliminate chemotherapy overnight,” he says. “But since 2011, we have moved from, ‘immuno-therapy won’t work,’ to ‘it will only work with melanoma,’ to ‘there’s no reason why it won’t work everywhere.’”

And Imugene is at the forefront of this work - even though it is a tiny stock: capitalised at just $15 million, and with a share price of 1.1 cents. But its upcoming Phase II trial will be a very closely watched one in the biotech world: good results would be highly likely to attract a deal with a major pharmaceutical company, and that could set the share price buzzing.

The potential can be seen from the valuation placed on the stock by Edison Research (Imugene is a research client of Edison), using conservative assumptions. Assuming a 20% likelihood of success for HER-Vaxx and including a A$25 million deal upfront after Phase II (at a 30% probability) – and a A$50 million Phase III success milestone (at a 20% probability), Edison Research values the shares at 4.1 cents.

James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au